House Passage of ‘MORE’ Act May Fuel Momentum Toward Full Legalization – and Big Profits in 2022, a New Report Says

On April 1, the U.S. House of Representatives passed the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act by a mostly partisan vote of 220-204.

If now passed by the Senate –which is hardly assured – MORE would remove marijuana from the DEA’s list of Schedule I narcotics, thereby decriminalizing (though not legalizing) it federally.

Cannabis advocates view the House action as progress toward full legalization. More and more states, they point out, have legalized medical cannabis (37, plus the District of Columbia) and adult-use cannabis (18, plus D.C.); and Maryland is eyeing its own legalization vote this year. Plus, the Senate may soon consider its own, separate, legalization bill. That is unlikely to move forward this year. But these legislative actions reflect growing social acceptance and legal momentum, argues New Frontier Data in its 2022 U.S. Cannabis Report: Industry Projections and Trends.

“With each passing year,” says the report, “as the number of legal states and the size of the legal industry grows, there is increasing pressure for federal action to address the disconnected patchwork of state regulations nationwide.”

However, continuing incremental pressure for federal legalization likely depends on Democratic majorities staying in place; and with the midterms this coming November, that ratio is by no means guaranteed.

Still, in the business world, the cannabis industry has shown some interesting developments, highlighted in the report:

• The legal cannabis market was estimated to be $26.5 billion in 2021 and is expected to rise to $32 billion by late 2022.
• If 18 states that New Frontier has identified as potential legal markets approve adult-use and medical cannabis use in the next eight years, $14.5 billion in annual retail sales revenues could be added by 2030.
• Those same new markets would increase to 64 percent the percentage of Americans living in states offering legal adult-use cannabis.
• Again, those midterm elections include adult-use ballot initiatives in Arkansas North Dakota, Ohio and South Dakota. Adult-use and medical measures are proposed for Florida, Idaho, Missouri, Nebraska and Oklahoma.

Of course, for the industry, such momentum and citizen support are good news: e.g., only 8 percent of U.S. adults oppose legalization, according to a Pew Center study. But there are important down sides as well.

Downward price pressure is a big one. “Looking specifically at state-level flower prices, it is the oldest adult-use markets – Colorado, Washington and Oregon – which have seen some of the steepest cannabis price declines,” New Fronter details. Since 2010, it says, average prices per ounce have fallen about 30 percent.

Another down side described is slow-moving progress on the goal to distribute industry benefits equitably. This is important in light of the decades of discrimination against minorities for nonviolent cannabis offenses. More recently, the pace in awarding dispensary licenses to minorities in legal states has disappointed advocates.

Political opposition in historically conservative states promises another challenge. And there’s an environmental one: Cannabis cultivation requires large amounts of water, New Frontier points out, which pits the industry against society’s “new urgency for sustainability,” especially in drought-plagued cannabis regions.

The result of these scenarios has been to put the brakes on growth.

There’s also New Frontier’s view that 2022 has the makings of a potentially turbulent year. The start of the year saw a “convergence of macro-economic developments” that are fanning that turbulence, the report says. Clearly these include the spike in inflation to 7.9 percent, in the 12 months ending in February. That was the highest level recorded since 1982.

Next, the report points to Russia’s invasion of Ukraine and the horrific war that has ensued, sending fuel prices soaring and predicting a similar result with the price of wheat, which Ukraine has traditionally supplied to the world.

Such issues impact spending on consumer products, and cannabis is one of those products.

Yet despite these negative indicators, if the MORE Act, or something like it in the Senate, passes that second chamber, cannabis business owners’ lives would become easier.

For starters, the marijuana’s removal from the Controlled Substances list would allow national banks to work with cannabis businesses without fear of Justice Department prosecution.

Also, the federal excise tax that would result from MORE’s passage (5 percent for the first two years, rising to 8 percent by year five) would create an “Opportunity Trust Fund” and use half of that revenue to support a “Community Reinvestment Grant Program.” The Act would also support substance abuse programs, with 10 percent of tax revenues raised. The remaining 40 percent of tax revenues would go to the Small Business Administration to help implement a new equitable licensing grant program.

The latter could begin to make up for the long-time discrimination by law enforcement against communities of color for nonviolent cannabis offenses.